Earnings Roundtable: Activision's Next Frontier, Blackberry's Final Frontier, and priceline.com's Ascent

Motley Fool Money is a one-hour weekly business radio show syndicated to radio stations across America. On our most recent Motley Fool Money Radio Show, Chris Hill talked with our analysts about some of the big earnings stories. You can catch this week's show online at motleyfoolmoney.com . This transcript has been edited for clarity.

Chris Hill: priceline.com (Nasdaq: PCLN  ) reported much better than expected earnings, thanks to strength in its European business. Shares of Priceline were up more than 20% on the news and have more than doubled over the past year. Joe Magyer, when I think about Priceline, I immediately think of the face of Priceline, William Shatner, but apparently Priceline owns Europe as well.

Joe Magyer: Yeah, go figure, and especially with all the drama that is going on in Europe right now, you wouldn't expect to see that kind of strength coming out of there, but their bookings in Europe were up 48% year over year, which is pretty massive. Shares are trading at 28 times earnings right now, which seems pretty rich, but I probably would have said something more a thousand percent ago, so take that for what it is worth.

Hill: On Thursday, Activision Blizzard (Nasdaq: ATVI  ) reported a 12% rise in quarterly profit, but Wall Street was expecting more from the video game publisher and the stock dropped as much as 6% in after-hours trading. Tim Hanson, what did you make of Activision's quarter?

Hanson: Well it was an interesting release, because it disappointed the market on revenues, but beat expectations on profits. What that shows is that their online games business, as opposed to their console business, is starting to come along. And the investing thesis here is that you will see profit margin improvement over time, as lower-margin console games become a smaller part of the business and the higher-margin online games, where you don't have to make packaging, you don't have to make a plastic cartridge; it's just people download it off the Internet. As that becomes a bigger part of the business, the company is going to become more profitable, and that looks to be taking place for a company right now that has more than $3 billion in cash on its balance sheet and no debt, is generating more than a billion dollars in free cash flow per year, which is a free cash flow yield near 10%, which is really attractive in today's interest rate environment. I think the market got this one wrong and that Activision looks like a pretty promising long-term opportunity.

Hill: Research In Motion (Nasdaq: RIMM  ) introduced the new BlackBerry this week; the BlackBerry Torch features a better browser and both a physical and virtual keyboard. Joe Magyer, early reviews are that this isn't really a game changer, and let's face it, this is a crowded space with Google (Nasdaq: GOOG  ) and Android picking up steam and the iPhone being such a hit. What did you make of Research In Motion's latest quarter?

Magyer: These guys are becoming somewhat of an "also ran" here, considering the size of the market that they've got. Right now, consumers are flocking to Android. In the past quarter, there were more Android-powered phones sold to consumers than RIMM or Apple (Nasdaq: AAPL  ) , which is huge. Right now, Google is activating 200,000 Android units a day, versus only 100,000 two months ago, which is just an incredible growth curve.

Hill: One area where BlackBerry still has the dominant position though is right here in D.C. in the government sector. Tim, you are a former government worker. How much longer can BlackBerry live off of that?

Hanson: You know, these were affectionately known as the "CrackBerries" when I was working in the government. People were addicted to them. I don't spend a lot of time down on the Hill anymore, but friends of mine who still work there have their government-subsidized BlackBerry, but they are carrying multiple devices on top of it, like an iPhone or an Android phone, because frankly, they are better, and they are more fun. BlackBerry continues to milk this cow for the time being, but as soon as the government subsidy wears out, I don't think employees are going to stick with the phones.

Early: With the new phone, BlackBerry has finally met the industry standard. Unfortunately, it happens to be the standard from 2006. So it is probably not going to be a game-changer. I think as soon as the government and businesses migrate to the iPhone or Android, they [Blackberry] are toast.

Joe Magyer , James Early, Tim Hanson, and Chris Hill may own stocks discussed during the course of the weekly radio show. To see the stocks they own, follow the links above to view their profiles. Mac Greer doesn't own any of the stocks mentioned.

Activision Blizzard, Apple and priceline.com are Motley Fool Stock Advisor selections. Google is a Motley Fool Rule Breakers selection. The Fool owns shares of Activision Blizzard, on which Motley Fool Options has recommended a synthetic long position. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On August 09, 2010, at 8:22 PM, MrZ2357 wrote:

    It seems that everyone has written rimm off.

    Should the Torch stem the mass exodus, at pe 11 this doubles from here.

    How likely is that?

    Take a look at this youtube video and decide for yourselves.

    http://www.youtube.com/watch?v=L_tuAVpEXFg

    Interested to hear from BB owners. Would you consider upgrading to this?.

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